Proposing to raise taxes within American politics has been about as popular as being in favor of kicking puppies and stealing Halloween candy from a kid. That being said, raising taxes is a huge solution to increasing the life of Social Security trust funds, but not just any taxes, mainly taxes on investment income.
The first thing that has to be addressed is that we are aware that investment income, or as insiders like to call it, capital gains, are already subjected to income tax, but sometimes at a significantly lower rate than typical income from a job would be. Even so, we are not suggesting that all capital gains should be taxed at the same rate as other income, but there is no reason that investment income shouldn’t be subjected to Social Security taxes. Right now, there are no Social Security taxes on investment income.
There are many people in America who receive a large portion of their overall income from capital gains. Before you suggest that we are picking on the self-employed day trader consider that the wealthiest 1 percent of the country earns about 30 percent of its overall income from capital gains. This basically equates to the richer you are the more likely you are to make money from investing.
The majority of people who go to work everyday and have an employer have no say in whether they want to pay Social Security taxes. Every paycheck 7.65 percent of their pay goes to Social Security. Of course those who have very high-paying jobs also get a break on Social Security taxes. Everything they earn in work income over $118,500 is not subjected to Social Security taxes.
We have struggled with trying to fix and find ways to save Social Security for decades. There are solutions all over the place, but politicians have lacked to fortitude to take action. It is time that we impose a Social Security tax on investment income. To take a look at how the two frontrunners for their party nominations suggest fixing Social Security click here.
